The market is officially in panic mode. I repeat. The market is in panic mode. Yesterday, the market took quite a hit and today it appears bad as well.
- The Dow lost 1.62 percent, closing at 16,170.22.
- The S&P 500 lost 2.09 percent, closing at 1,833.09.
- The Nasdaq lost 3.10 percent, closing at 4,054.11.
- Oil lost 0.26 percent, trading at $103.34 a barrel
- Gold gained 0.99 percent, trading at $1,318.80 an ounce.
- Silver gained 1.44 percent, trading at $20.06 an ounce.
But don’t run for the hills just yet. We have seen this before. We know what this is – another correction, a rebalancing, if you will.
- Momentum investing involves buying stocks that are already trending higher, often taking their price/earnings ratios into the stratosphere. When the momentum turns, prices can fall rapidly as investors rush to the exits.
In the above list of market woes from yesterday, note that both gold and silver rose (go to metals in times of fear), but not by much, which suggests the fear is not that great. Now, put that into today’s selling context and you have both gold and silver dropping along with the other indices dropping.
How will it end up today? I don’t know. What I do know is that the selling pressure seems to be easing. The VIX and the QQV (go to indexes in times of panic) peaked early this morning and both are trending down now. As well, oil is moving higher (go to commodity when times are good) and the five big indices I track are all losing selling steam. The DIJA is now 100 points (plus or minus) above its low for today.It is fighting to go green.
Money might be flying out of the “big mo-mo” stocks, but so what? The money will have to go elsewhere in the market. Why? Well, show me a better return for your dollar than the market? In fact, show me any return for your dollar aside from the market, which brings me to another point – Janet Yellen. The new banking chief of the world has clearly stated that zero-bound interests are here to stay for some time. No, the market might be down today, tomorrow, and the day after, but it won’t stay down. “Thar is gold in them thar hills,” as the saying goes.
So, I have another boring day because I am on hold until the market finds its bottom. When it does, I and the rest of the bulls out there will be ready with cash in hand, because that is what we do when the market corrects – we buy. We understand as long as the fundamentals are in place the market will find its way back; it has to. It is compelled by financial law to do so. It cannot help itself.
Here is some information, something to think about, especially if your memory is long enough to reach back to the dot-com bubble that crashed in 2001.
- Venture capital funding for U.S. start-ups hit its highest mark since 2001 during the first three months of the year and 11 companies were valued at $1 billion or more.
Kinda scary, Then again, maybe not. Back then, the market was way, way crazier than it is now, in terms of mania. As well, there was a looming recession just waiting to happen, so when the tech market crashed, well, there was nowhere to go but down.
Me thinks this time around big money has learned a lesson or two from those high-flying days. Sure, maybe some of the projects are overvalued, but that is when the market does what it seems to do best – fix those aberrations. Witness its behavior this week and last.
So, let’s wait for more earnings to see where we are at in terms of valuation. We will have a much better idea of where the bottom is when we know more.
Trade in the day; Invest in your life …
